3/09/2010 @ 6:00PM

Nintendo: Staying Ahead Of The Game

Nintendo
today is perhaps the biggest player in the videogame industry, with its Wii console and DS and DSi handhelds handily beating the competition in terms of units sold worldwide, as well as a number of top-selling game franchises. Reggie Fils-Aimé, president and chief operating officer of
Nintendo
of America, talked recently with Forbes about new trends in technology and how
Nintendo
plans to stay ahead of the game.

Forbes: Steve Jobs called you guys out when he positioned the iPhone and iPod touch as handheld gaming devices. What is
Nintendo
doing about
Apple’s
encroachment on its handheld business?

Reggie Fils-Aimé: There’s been no data to suggest an encroachment on our business. The iPhone has been out on the marketplace for just a couple of years. In the last two years we’ve set two records on our DS business, last year selling over 11.2 million units. So there’s been no evidence that we’ve lost any business to that competitor.

On the other hand, we recognize that consumers have a limited amount of entertainment time, and anything that takes entertainment time away from the Nintendo DS, DSi and Wii is a competitor. And so from that standpoint, we need to build experiences that are compelling and sticky, and that consumers can get excited about. That’s our challenge.

Microsoft
is going to launch its motion-control system Project Natal this year for the Xbox 360, and PlayStation is also planning to add a motion-control system to its PlayStation 3 hardware. How does Nintendo need to innovate to stay ahead of the times?

We’ve already been innovating on hardware. First, we’ve sold over 27 million pieces of Wii hardware just here in the U.S. Every single one is motion controller-enabled and that’s been a key point of difference for us. On top of that we’ve already launched our second generation of motion control with Wii MotionPlus, and we’ve sold about 10 million pieces of that accessory. So we already have a pace and a rhythm of bringing great motion-enabled experiences to consumers.

Our competition will face their own challenges. They’ll have to create compelling software. They’ll need to offer it at a price point that makes sense. They will be separately challenged because the motion-enabled part of their business will only be a small part of their line. For us, it’s core to what we do.

But Nintendo’s also known for taking big innovative jumps, like when the company launched the original Wii system. Can we expect to see any other big jumps in the future?

Absolutely, we pride ourselves on the big innovative jump, typically in the area of the consumer experience. The way we approach that innovation, because we have hardware developers working side by side with software developers, is that when the software developer comes forward with an idea that can’t be executed on the current platform, that’s when we start thinking seriously about the next system. We’re not there yet, from a Wii perspective.

What about the idea that consoles are becoming obsolete, and that digitally-distributed games and social games on the PC are taking over?

There are still new experiences that can best be brought to a consumer with a controller, coupled with a piece of hardware, coupled with a compelling piece of software. Yes, the world is moving more and more digital–and so are we. We’ve got great WiiWare content, and we’ve done a fantastic business with our Virtual Console. But fundamentally, for those big games, for those experiences that are truly innovative, we do think a controller coupled with software, coupled with hardware is necessary to bring it to life.

It seems like Nintendo has been slower than the competition in adopting new social and video features, like Facebook, Twitter and
Netflix
.

The way that we think about these new experiences is, for us, they need to make sense with the system and from a consumer-experience standpoint. For example, take Facebook. The ability to take a pictures and manipulate it on your DSi or DSi XL and upload it immediately to Facebook, for us, was just a great seamless experience.

The Netflix application is going through its final testing right now and is on track to launch in the spring. Similarly, it’s going to be a fantastic seamless experience as well. That’s because the Wii already comes Wi-Fi-enabled, and with great Internet-connection capability. The consumer won’t have to pay incrementally: as long as they have a high-speed Internet connection and a Netflix subscription, it’s free.

How about the virtual goods business? Will Nintendo for example ever start selling clothing and accessories to players for their Mii avatars?

We don’t think it’s an idea that creates value for the consumer. Consumers love to make Mii’s and that has been core to the Wii experience. We don’t believe selling clothes or hats is something that the consumers will find valuable. And candidly, if you really challenge the competitors who are playing in this space, I think they would be hard-pressed to show any true value from a consumer standpoint.

What we think is important is providing real experiences. So the content drives that. We think that providing information through the Wii and through the DS and DSi is going to be a critical opportunity for us. We’re doing that now through the Nintendo Channel, we’re doing that through a self-produced video segment called “Nintendo Week.” So we think those initiatives provide a lot more consumer value rather than trying to sell “wearables” and action items for your avatar.

What are Nintendo’s plans for other new trends in technology, like high definition or 3-D?

For us, technology is not an endpoint. Technology is an enabler for fantastic consumer experiences. So from a hardware standpoint, we are always looking at technology. But in the end, the technology has to enable a new, unique experience.

So when people talk about high definition for the Wii console, our feedback is that that by itself will not create a brand new experience. Therefore, we’re not interested. What we have to push for are groundbreaking new experiences. Technology has to enable it, not to be a means all by itself.